On Backtesting

How does one create a mechanical trading system? However one comes up with ideas for entry and exit signals, testing those ideas is essential. In trading, one generally tests ideas on historic data, and thus the term “Backtest” is often used to refer to this sort of test, a test that is performed looking back at what would have happened to ascertain what might happen in the future.

Here are some thoughts on backtesting, in no particular order.
Continue reading “On Backtesting”

Shameless Plug for Sandra’s Team in Training Goal

The race day is almost here!! On Saturday the 21st of October, my little sis will be in San Francisco running the Nike Women’s Half Marathon in support of the Leukemia and Lymphoma Society’s mission to help find a cure for blood cancers. For the past several months, Sandra has been tirelessly working toward this milestone. Many of you have helped her along the way. She certainly could not have gotten this far without all her wonderful supporters. At this time, she has almost reached her goal, but still has a small amount she needs to raise. If you were hoping to donate toward this cause, today is the day!!

Thanks for your consideration, and Sandra, we are proud of you and excited about your upcoming race! GO Team In Training!!

Anti-gnostic Thanksgiving

I recently had some prayers answered quite wonderfully. And when I had prayed, I had ended with something along the lines of “… and if you will do these things, then I will give you thanks and praise.” But when God actually did those things, it felt a little abstract, even gnostic, to simply say (in the quietness of my head), “Thanks.”

Leviticus 7:11-15 (also see Leviticus 3)
And this is the law of the sacrifice of peace offerings that one may offer to the Lord. If he offers it for a thanksgiving, then he shall offer with the thanksgiving sacrifice unleavened loaves mixed with oil, unleavened wafers smeared with oil, and loaves of fine flour well mixed with oil. With the sacrifice of his peace offerings for thanksgiving he shall bring his offering with loaves of leavened bread. 4 And from it he shall offer one loaf from each offering, as a gift to the Lord. It shall belong to the priest who throws the blood of the peace offerings. And the flesh of the sacrifice of his peace offerings for thanksgiving shall be eaten on the day of his offering. He shall not leave any of it until the morning.

The peace offering (used specifically for thanksgiving) did not establish peace, it celebrated it. The other sacrifices found in the early chapters of Leviticus were enjoyed by God and usually the priests, but the peace offering was shared with the worshiper as well.

Additionally, even our spoken thanks have a public context in the Bible. For instance, Psalm 107 introduces four stories that result in thanksgiving and says:

Let them thank the Lord for his steadfast love,
for his wondrous works to the children of man!
And let them offer sacrifices of thanksgiving,
and tell of his deeds in songs of joy!

Let them thank the Lord for his steadfast love,
for his wondrous works to the children of man!
Let them extol him in the congregation of the people,
and praise him in the assembly of the elders.

In and among these (and many other) passages on thanksgiving, are the countless stories of feasts and parties in the Bible. As one example, the reason the older brother stands out so harshly in the story of the prodigal son is that if you’ve been reading your Bible carefully, once the father accepts the son back into the house, you pretty much knew there was going to be a party. The father was thankful, therefore a party. Par for the course in the Bible.

The aptly named American holiday Thanksgiving, then, seems exactly right, at least in its inception… but perhaps should be typical, not unique. It actually reminds me of the feast established in Esther (see Esther 9:22). And that’s where my thinking finally landed on my own particular thanksgiving. As a rough sketch, it seems appropriate to:

1) Set aside some resources for an offering of thanks
2) give a larger portion as an alms to our church or some other meaningful offering
3) use the rest to have a celebration with others.

Here’s a couple follow up thoughts that have come up as Tricia and I have discussed all of this.

First, it may feel awkward, very nonspiritual, to use part of an offering to celebrate. However, this is exactly how God wanted it done in the past. The peace offering gives us an example of this, and so does the tithe.

Deuteronomy 14:22-27
You shall tithe all the yield of your seed that comes from the field year by year. And before the Lord your God, in the place that he will choose, to make his name dwell there, you shall eat the tithe of your grain, of your wine, and of your oil, and the firstborn of your herd and flock, that you may learn to fear the Lord your God always. And if the way is too long for you, so that you are not able to carry the tithe, when the Lord your God blesses you, because the place is too far from you, which the Lord your God chooses, to set his name there, then you shall turn it into money and bind up the money in your hand and go to the place that the Lord your God chooses and spend the money for whatever you desire—oxen or sheep or wine or strong drink, whatever your appetite craves. And you shall eat there before the Lord your God and rejoice, you and your household.

No wonder Israelites didn’t struggle with gnosticism. God sanctioned them to use a portion of their tithe to party! He wanted them to enjoy themselves and rejoice in his presence.

Also, flaunting wealth is bad, yet the Bible emphasizes including the poor in your fellowship. Wealth is a relative thing, and I don’t believe our culture gives us much help at this point. It sure seems like if you use resources well beyond what you normally use to have a feast for thanksgiving to God (think of the scope of many of our Thanksgiving holiday celebrations), it could give the impression of a wealth that isn’t even necessarily there. Yet a party to rejoice in the Lord should be inclusive of those with less. Jesus doesn’t leave any wiggle room on this point (Luke 14:13). So we in the church will just have to figure out how to do all this appropriately, whatever the resources with which we have been blessed.

Lastly, I think our thanksgiving is primarily about the past and should not be used to make a claim or boast about the future. Likewise, we should not withhold our thanks based on fears for the future. When the crops came in for the Pilgrims, they had a feast in celebration. I rather doubt any of them presumed there would be no future hardships. But we can’t be stingy with our thanks and praise for the Lord has already done just because his providence may take a different turn in the future. So our thanksgiving should be by faith, that is, without concern for the future, trusting that the Lord will provide. It should be an Ebenezer (1 Samuel 7:12), for the Lord has brought us this far.

Q&A on trading

Rusty, a good friend from my college days (and a bit beyond), has been asking some interesting questions in one of my posts below on trading. Here’s his latest comment:

Hi Jay –
The Vanguard funds have worked out well for me. Besides capturing the market return, they’ve had the other benefits of requiring absolutely none of my time, and I sleep a little better at night.
Regarding efficient markets, I think it depends on what you’re investing in. Are you looking at very small companies with a relatively small number of transactions? I might be convinced. If you’re trading GE and Microsoft, or more generally stocks in the S&P 500, I’m less inclined to agree. With millions of shares traded per day, that’s an efficient market. The people trading GE (as a whole) know a lot more about GE than I do.
If you actually generate the returns you’re expecting trading stocks in the S&P 500, that is an amazing feat.
Two other comments, if you will. I think it’s one thing to be able to say, “We’re in a tech bubble” or “These tulips cost way too much.” But it’s really hard to invest against a bubble. Greenspan was warning of irrational exuberance a couple of years before the bubble popped. Shorting too early would have cost quite a lot, not to mention passing up the rest of the ride up.
Besides that, I can’t think of how you’d try to exploit popularity in the 1-5 day time frame. That’s mindblowing to me, and I’d love to hear more about that. Are you researching these companies, or is your selection based on some kind of technical analysis or trend detection? I’m intensely curious.
Finally, the big question for me. Why aren’t others discovering this, and competing away the returns? Why isn’t some mutual fund company advertising a fund that returned 70% on average over the past 6 years?
Greatly enjoying this,
Rusty

I started writing a response in the comments, but thought I’d put in a post so others can join in if so inclined.

Okay, one point of clarification. When I discuss my system, I am not referring to Tarzan. Tarzan was/is an experiment, but I do not trade it currently, though there are a couple very good ideas cooked into it (I think). If you read the original post on Tarzan, you will see a reference to my early attempts at Collective2 which performed great but were ill received. That system was the alpha of my current trading system, the one I talk about when referring to my own trading.

A point of agreement. I think it is of the utmost importance to sleep well at night and have that as one of the bedrock requirements of my system design. For me, that entails being fully in cash every night, even though that tends to degrade the performance a bit in the long run. I’m just very prone to frustration at being burned by the overnight news cycle, even though it helps overall. So I simply don’t mess with it, and have actually tried to make it an advantage.

Another clarification. It seems that some of my comments are being taken to refer to macroeconomic conditions. Another of my goals, however, is to build a system that is as uncorrelated to the broader market as possible. So, for instance, in the past few days, when the market was moving up, I was almost entirely short, and did okay… which is not to say that happens every time.

Which brings me back to that post I need to write on my basic approach. Suffice to say I find it MUCH easier to gain an exploitable edge in the 1 day time frame than any other time frame I’ve evaluated. And no, I don’t actually know the names of the companies I’m buying or shorting day by day.

The last question is pertinent (though once again, those results are against a system I don’t actually trade)… I’ll probably need to address it at some point as well. But I think the answer is roughly this: 1) fast-trading systems degrade with the amount of capital invested, so my technique would probably be terrible for a mutual fund; and 2) it took me a couple thousand hours to get here, so though others may be able to get there much more quickly, it is probably a reasonable barrier to entry for the average personal investor/trader.

Sing With Me, If You Will…

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“The splotchy blue wall is gone…

Heigh-ho, Heigh-ho, Hah!

Let us sing a happy song…

Heigh-ho, Heigh-ho, Hah!”

Many thanks to Abigail who watched over Josiah this afternoon on her day off so I could prime over this stunning (a little too stunning, if you ask me!) bit of color in Josey’s room.

Now to paint the nursery a more pleasing (read “lighter”) shade of blue….

Saving Time at Suppertime

As we continue on without our still-awaited-for dishwasher, I have been spending a bit more time than usual washing things by hand. Consequently, I am doing my best to make mealtime prep easier without succumbing to the very attractive alternative of eating out. I really can’t afford it this month, given I put a hefty chunk of my budget toward the dishwasher, and also having purchased a most wonderful chair and ottoman at a consignment store, pictures of which I hope to show you soon.

So, we have continued to eat meals at home. And, we have begun using some paper/plasticware for simplicity’s sake. Most of all, I have really put thought into making meal components stretch over several meals, so I don’t spend all my waking hours in the kitchen! Making main ingredients work for more than one recipe is an easy concept that I should have employed more often, even with a dishwasher. I’m learning that one can make two very different meals without doing a lot of extra cooking the second time. And enjoying two separate dishes is really nicer than just eating the same meal twice as often in the same week.

So, when I brown ground beef and onions, I use part of it to create a sloppy joe supper, and serve the rest a couple nights later spiced with taco seasonings, and coupled with appropriate toppings in crunchy corn tortillas.

The roast chicken we enjoyed on Sunday with rice on the side becomes “Tricia’s Chipotle Bowls”: rice topped with that delicious flavorful chicken, beans, tomatoes, cheese, salsa, and guac.

Monday night’s extra side salad I prepared (undressed) becomes the base for Tuesday’s lunch: add dry tuna, black beans and some crushed pepper crackers, top with a viniagrette.

Tuesday night I made eggs and bacon, purposefully cooking some extra bacon which I next day chopped and added to softened cream cheese along with scallions, peppers, and broccoli, to spread inside tortillas for a quick, no-cook supper before we headed out to Wednesday night church stuff. (By the way, Jay and I LOVED these tortilla wraps, but the kids were not huge fans.)

My next idea involves using this recipe from Ann (which I really excited to try, substituting my rice noodles we purchased at a local Asian grocery store during a recent family field trip, in place of the pasta it calls for) to create supper, and then using the leftover chicken for a dinner salad the next night.

So….how about a little reader participation? Do you have any ways to make your meal ingredients go further, and thereby lessen your work in the kitchen, but still enjoy a variety of homecooked meals? Please share! I know there are plenty of people out there better at this than I am, and given we have a few more weeks to go without our washer, well, I can use any tips you have!

A Very Good Thing

(Warning: this is one of those long, rambling posts I am most proficient at creating. My apologies to my patient readers. Please feel free to skip it altogether if it’s just too much for you!)

Almost three years ago, I was excited to learn about a small preschool co-op in our area that is run entirely by mothers. It wasn’t something I could take advantage of just then, but it sounded fantastic to me and I tucked the idea of it back in my mind for future reference.

At the time, we had just made the decision to keep Nicolas out of preschool to further our goal of affording Covenant’s tuition for our older kids, and I knew we wouldn’t sending him back. This was hard in a couple ways: for one thing, Nicolas LOVED school. He is our most social child and really thrived on the experience of his sweet little preschool class. For another thing, I loved his school. The teachers were compassionate; they taught their little students well, sharing the love of Christ with them in word and action, and it was just really a great little place for him at that time in his life. The selfish side of me also loved the little “break” it afforded me in the middle of the week: to accomplish errands with one less child in tow, get to the doctor’s without finding a sitter, or drive a school field trip for one of our older children without finding someone to watch Nicolas.

But there was no question that based on decisions we’d made about private school, preschool would have to go, and so we said goodbye to our beloved little Church school with wistful hearts. Last year Nicolas was home with me, and we did some small school type activities together, which he enjoyed dearly. But he would ask me on a fairly regular basis, when he would get to go to school again, and obviously yearned to do so.

This year, even though Nicolas could technically (just barely) qualify for Covenant’s Kindergarten class, we chose to hold him back for another year before enrolling him. His birthday is less than one month before the cutoff date for his age group, which meant he’d be the youngest in his class. He is a tiny little guy compared to his peers (all the four year old girls in our neighborhood have now passed him in height), he’s a little slower on the gross motor skills, plus he still gets extremely tired by 1pm, to the point of actually taking a nap some days. I could go on and on with all the reasons we as his parents felt it wise to keep him home, but Jay and I felt so comfortable and of one mind in the decision to wait before enrolling him in school. The only downside in our minds being that again, our little guy might have some emotions to work through as he continued to wait his turn for “big school”.

And then God provided Chapel School. I put my name on the waiting list for this co-op over two years ago. It’s not an exclusive club by any means, but it is limited in size by the ability of moms to run their own little school, and the fact that lots of families are hoping for a chance to join in. When I put my name on the list, I was hoping that a spot might open up for Nicolas someday, but not right then. I was about to have a new baby, and knew a house move was likely in our future as well.

A couple years went by, and then early this summer I received the call I had been waiting for, telling me they had an opening for Nicolas. It’s what I had thought I wanted, and yet when they asked us if we were interested, I hesitated to say yes right away. I worried about the fact that his ability to participate in this “school” hinged on my own involvement, which meant more work for me, and less time in my already full schedule. My saying yes to Chapel School meant I wouldn’t be dropping my little boy off for a few hours while I ran errands or accomplished tasks. Quite the opposite: in this situation, I would not only stay with him for the entire morning he attended school, I would actually teach a class for one out of every four meetings, and at the time, such a thing sounded a little daunting. And truthfully, I sort of wished we could just scrape together enough money to send Nicolas off to preschool for a couple of days a week. I really did. Which isn’t a terrible thing at all…but it wasn’t an option, and still wanting it left me in a state of discontentment, even if it wasn’t a constant pestering thought. I prayed about it, and mulled over my options for the next few days. And without feeling 100% confident in my decision, I told the organizers of the co-op, yes, to please put us on the roster for 2007.

Well, last week, after a couple months’ countdown by Nicolas, who has been eagerly awaiting the start of school all summer, we had our first day of Chapel School. I’ve had several organizational meetings before this which facilitated my meeting many of the other moms who are involved. We attend school and church with several others, so there were quite a few familiar faces by the first day. Nicolas knew very few of the other children, but he jumped right in, and had himself a blast. After watching him enjoy his first day so much, there is no question in my mind that I made the right decision in saying yes to this commitment. This year he will have himself a bit of a preschool experience: at his school, he will enjoy learning phonics, math, and language and participate in art, cooking, Bible and music. All in a loving, grace-filled environment with other children and moms who are blessed to have the chance to experience this together. Even Josiah, who is in the nursery because he is under the age of three, will enjoy enrichment time for some of the morning. He, along with the rest of the older nursery crowd will have a time for singing, stories, recess, and games. This was an unexpected, extra blessing for him to enjoy.

But it hit me this past week, that the most unexpected blessing was for me. I was recounting the events of our first morning to Jay, eager to share with him all that had gone on, impressed with how much this group of Moms manages to accomplish in two and a half hours’ time with thirty bouncy and active children ages 3-6. The atmosphere at Chapel School was wonderful. But not just for the kids. All of us moms, as we work together to help teach our children, are serving as helpers and sources of encouragement to each other. Supporting one another in a hugely practical way as we strive toward a common goal of training up our children. How wonderful to have another source of help, a group of moms doing the same things I am doing, facing the same struggles and triumphs, and attempting to nurture these little people in the things of the Lord.

Despite our enjoyment of this new experience, it came as a complete shock to me the realization that even if tomorrow we all of a sudden had the ability to enroll Nicolas in a regular preschool, that I no longer had any desire to do so. Funny and wonderful how this has changed. It’s not that I’m not busier – I am. Life is fuller than I have ever felt it was, and I have yet to catch up with my laundry, needy house, and a mountain of other tasks that still are asking for attention. But I have gained a sense of peace about this precious time with Nicolas. Instead of feeling like I am lacking somehow because I won’t send him to a traditional preschool, I know I will dearly treasure this fleeting time with my sunny boy before he’s in “big school”. I am so grateful for the chance to participate in this co-op, both to be a part of teaching sweet Nicolas along with several of his peers, and to form some new friendships with other moms of preschoolers. I am glad that my two little boys will have this opportunity for growth and learning among friends this year. Most of all, I am utterly thankful for the very real blessing of contentment (in at least this part of my life) with our current situation. That is a very good thing, and one for which I humbly give thanks.

It’s Dishpan Hands for Me!!

Well, it looks like we made a very sound decision in purchasing the new dishwasher. Only catch is, it won’t arrive in time to save me from a terrible case of dishpan hands. Because it looks like ours has officially decided to stop working. Last evening the children on dish duty gasped in horror and called, “Mommy! There’s brown yucky water coming out of the front of the dishwasher.” Upon inspection, it was confirmed that the washer appears to be leaking its rusty innards out all over everything. Ew, and gross!!

I rolled my eyes at Jay and remarked that I guessed we’d be doing dishes by hand until early to mid October when our long-awaited new model will be in. He answered, rightfully so, that I was already pretty much washing them entirely by hand anyway, given the “washer’s” cleaning abilities had been mostly gone for some time now. And he’s right. We’ll probably save a nice chunk on our water bill these next few weeks if I am just washing things by hand, instead of first hand-washing it all, then running the dishes through the non-washing KitchenAid for a long, expensive rinse. Or we could just go to entirely disposable dishes for a time. But we probably won’t.

Truthfully, I know just how spoiled I must be to moan about going without this appliance for a few weeks, given that many people in the world today have never enjoyed the luxury of a dishwasher. I am hopeful that in the next few weeks as I am without one, that I may learn to really appreciate this help in life that I have usually taken pretty much for granted. Sometimes it helps to go without something for a time to realize just how thankful we should be for it when it is around.

I Have Like the Coolest Husband Ever…

at this very moment, he is sitting in “Knight School” Teacher meetings (that’s a play on words using our school mascot for “Back to School Night”) for each of our school-aged children. And what is he doing while he’s there? Not playing video games on his hand held technical device, though to some in the room it might well look that way! No…he is sending me up to the minute short notes via his Blackberry on what is being said, and conveying information from the teachers that I will find pertinent, including details on classroom conduct, procedures and rules for chapel, and LOTS of curriculum content. He knows how much this means to me since I feel a high need for details on everything that goes on with our children and their school. Wow. I think I am falling in love with him all over again!